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tv   Power Lunch  CNBC  November 29, 2012 1:00pm-2:00pm EST

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care. xlv is the etf to play. >> report mcmoran with a 37.13 stock close. >> gt goodyear tire. >> ford gets above $1,150, i think you stay long this name. >> catch more "fast money" at 5:00 p.m. eastern this evening. "power lunch" starts right now. >> announcer: halftime is over. "power lunch" and the second half of the trading day start right now. scott, thank you very much. you know the saying about sticks and stones? well, words may not hurt you but word from washington are once again spooking the markets. just look at that dip right before noon. how do you protect your money from the washington speak? daily deals turning to daily duds. living social announces layoffs. groupon's board discussing the future of its ceo. is time running out on those daily deal websites and their business model? and, the hottest tech trends
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of 2013. we'll show you how you can cash in today. i'm happy to be back from washington. i'm happy sue herera is at the center of the action -- i'm just a happy guy, sue. i'm glad to have you back, too. it happened just before noon. once again the markets tanking, a steep dive after discouraging words from washington on the state of the fiscal cliff. this time it was house speaker boehner speaking with reporters after meeting with treasury secretary tim geithner. eamon javers is in washington with the latest. eamon, the sentiment down here is these guys should stop talking and start crafting a deal. >> reporter: that's the sentiment here in the hallways of capitol hill as well, sue. i can tell you that. we are starting to get a little more clarity on what's going on here today. i just had the chance just a few moments ago to button-hole senator harry reid here in the hallway, asking him a very specific question. i said did treasury secretary tim geithner come up here with a new specific offer for republicans? is that what he laid down on the table for speaker john boehner
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today? reid told me -- no, there was no specific offer here today from geithner to the republican side. he said that the president of the united states made the democrats' over two weeks ago and there's been no new specific offer since then. i think that explains a little bit of why we saw this reaction from speaker john boehner a little while after he met with geithner. take a listen to how boehner described today's events. >> despite the claims that the president supports a balanced approach, the democrats have yet to get serious about real spending cuts. and secondly, no substantive progress has been made in the talks between the white house and the house over the last two weeks. >> sue, on a lighter note, it looks like there are negotiations going on up here. i just saw a plate of lunch being brought in to the room where we believe that secretary geithner is sitting right now. we're also seeing some of the aides go in and out of that room as well.
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so clearly deals are being crafted here. i saw rob nabors, the legislators aide from the white house in mitch mcconnell's office ws office, but something is happening here and we're just trying to stay out in the hallway and parse it all out, figure out what the horse trading is all about here. >> or get a hoefltd person who brought in the sandwiches and see what he or she heard. >> i wanted to slip my iphone on it the to the lunch plate as it went in! >> excellent idea. thank you very much. maybe they should be serving kenny's recipe of today which is eggs and purgatory. because this is what this market feels like. it feels like it's in purgatory right now. it can't figure out when it's going to be able to move decidedly higher or move decidedly lower. >> you know what it's telling you? it's telling you at any whiff of positive news, any sense that there is going to be a deal, a
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deal that it believes, the market wants to move higher. it just wants clarity. any sense of this confusion or lack of clarity and we see what happened. right? right after boehner's quote. he made some good points. republicans realizes taxes are going to go up, everyone realizes what's going to happen to rates. what we still don't know, what are the democrats proposing to really cut. put on the table, get it out there and let us know what it is. >> how volatile do you think this market is going to be the longer this goes? >> i think if you're the day trader type you absolutely trade it because you love volatility because that's how you're going to make money. if you're the long-term person, i don't think you chase it at all. i think you remain patient, stay on the bid side, let prices come to you because i think they will come to you. the longer this goes on the more frustrated this market is going to get. then it will start to make et cetera own own and we know what happens then. >> thank you, kenny. eggs and purgatory, tyler. that's the recipe of the day. i think it is quite apropos. house speaker boehner
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voicing his disappointment over the state of the debt talks. so is there still a chance for a deal before the end of the year? here to explore that and more, representative bill paskcrell. welcome back. glad you're with us. you just heard the points of view there from speaker boehner, from kenny pu. what spending cuts would you be able to adopt right now as part of the spending cuts program? >> there is no question that the president offered in his budget if you remember very specific cuts to the military which were acceptable to secretary panetta and the military establishment. if we don't do these things right now, then obviously we're going to be facing across-the-board cuts for the military and that's something that none of us would really
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want. i don't. >> perhaps you misunderstood me. i was asking about the entitlement programs. let me drill down one more time on medicare and medicaid. what specific changes to save money or slow the growth of spending in medicare could you endorse right now? would it be raising the age for full eligibility? would it be increasing co-pays? would it be doing something about the end of life expenditures which now consume 25% of medicare's expenditures, go to the 5% of individuals who are in their last year of life. >> the latter part of what you just said is something that we should be looking at. remember, we were scared off the subject two years ago, tyler, looking at the end of life expenses. and that turned into panels that were going to decide who lives and dies which was totally ridiculous. there's nothing in the health care act which even comes close to that. but that is an area i would accept. i do not accept -- if we had to vote tomorrow, i would not vote raising the age. >> why not?
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americans' life expectancies are so much longer than they were in 1965 when medicare was begun. >> because then you create another problem. you create a problem for those people who are young weather they come to that age when they have to retire, now you have who's going to cover them, where's the coverage going to be for the health care? i think you'll create a larger problem if you do it that way. i said that when i first came to the congress and i say it now. but there are some things we should be looking at. but why hold the middle class hostage to the changes we know that have to come to medicare without hurting beneficiaries why do we have to do that? >> let me slip in one question about the revenue side. many companies have been paying dividends to get ahead of what they clearly must suspect is going to be an increase in the tax rate on dividend income and potentially on capital gains. do you foresee that the tax rates -- now 15% on dividends and capital gains lsh will be higher in 2013? >> i believe it should be on the
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table and he believe you'll see some changes in there. we handle personal income very differently than earned income. that's why we have a skewing of the tax policy against the middle class. we got a smaller milled class because of how we tax american people. i want to first of all preserve 98% of those tax cuts for the milled class and then we can debate general tax reform which we definitely need. there's no two ways about it. >> congressman pascrell, thank you again. breaking news from the bond market. you saw the headlines cross moments ago. $30 billion in 7-year notes up for auction. rick santelli, we have a bid to cover ratio of 2.81%. >> that 2.81% is above the 10-auction average. this is around 2.74%. actually, close to the 40%
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106-auction average. directs -- 19.7% that is a record high since they brought the 7-year back in february of '09. i can't find a higher direct bid. the yield -- 1.045%, right in the middle of the bid offer we give this auction a b-plus, solid auction. 99 billion is now behind us and considering the issues of fiscal cliff we're going to be looking to handicap a whole lot more auctions over the next several years. back to you. >> absolutely. breaking news now. it concerns microsoft. let's go out to jon fortt. jon? >> hey, sue. microsoft has officially announced the pricing for surface pro. that's the version of microsoft's tablet that runs an intel core i5 chip. it was anticipated that this would be higher than the surface which started at $499, $599, and indeed it is higher. it is $899 for the 64 gigabyte
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version. for the 128 gigabyte version, $99.99. surface pro is backwards compatible, it will run windows 7 apps and also done pen input. is sort of the cadillac version of microsoft surface. priced at a premium until tablet market. we'll have to see how it does and it doesn't arrive until 2013. new positive signs on the u.s. economy to tell you about. it grew faster than expected in the third quarter. gdp expanding at an annual rate of 2.7% topping last month's estimate of 2%. our senior economics reporter steve leisman is here. what struck you about this report? i remember the day before yesterday you were saying don't expect that kind of performance in the fourth quarter. >> exactly. i'll take it. we can get to 2.7%. it is better than 2%. i don't love how we got there. big parts of that was government spending at the federal side. also you had inventories go up.
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what you didn't have is -- we marked down consumer spending and business spending was negative. i want to do 3%, 3.5%, 4% with strong consumer spending and strong business spending. those will be a sustainable path for the economy. >> can't let you go without a little fed speak. mr. dudley, new york fed chief, speaking this morning. >> some important comments. hurricane sandy was directly in his district so he made some comments about it. he said that the damage was worse than first anticipated. that's something we've been talking a lot about. original number was $50 billion. it's in the $70 billion to $90 billion range. it is probably going to shave a quarter to half a point off gdp. you talked about the fiscal cliff which he says congress and the president must address. he says because we're at the zero balance, interest rates were zero, the effect of the fiscal cliff is getting much worse than if the fed were not at zero.
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>> because they could do something. >> the only positive thing which dudley did not talk about but it is something that's on the radar is that, as the fiscal cliff fears rise, interest rates fall on the 10-year. so the effect the fed would have from easing is already in -- already happening as a market reaction. >> steve, thank you. when jeff kilburg is not fired up about the irish he is fired up about what mr. dudley said today. why? >> absolutely. he came out with very dovish comments. he lass a permanent vote and he is quite the confidant of ben bernanke. so he flat-out gave a wink-wink, there's something big coming in less than two weeks. >> he's been a dove for a long time though. no change but just to hear it articulated gives you some sense of -- >> it does. this could be a one-two punch. if the fomc comes out with additional measures, subsequent week later, all of a sudden they have the fiscal cliff resolution, bam, we could see a
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test of the 1,460 of the s&p. is there story in "the journal" about more action possible out of the fed. taking a look at shares of advance auto parts reportedly the auto parts retailer put itself out for auction but the bids it received weren't to its liking. as a result that auction has failed. its shares are down 6.5%. look at some its competitors in that space. weakness pretty much across the board right now. auto nation down 3%. pep boys down 2%. advance auto parts the weakest performer, off 6 1/2. fears of retailers heading into the holiday season. and new signs that the online daily deal business is still struggling. courtney reagan on the retail beat, julia boorstin looking at job cuts at living social. courtney, you're up first. >> well, black friday was no match for super storm sandy. the storm really taking the wind out of the sales for november same-store sales. i'll tell you who got hit the
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hardest and who is faring a little bit better. julia. more pink slips in the daily deals space. can living social and groupon adapt to harsh new realities? i'll have that story coming up after the break. [ male announcer ] the markets keep moving. make sure the news keeps coming with thinkorswim by td ameritrade. use the news links breaking stories with possible breakout stocks, options with potential opportunity, futures and forex with in-depth analysis. it's an all-you-can-eat buffet for all things trading. thinkorswim by td ameritrade. it doesn't just deliver news. it's making news. trade commission free for 60 days, plus get up to $600 when you open an account.
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tiffany losing its sparkle with investors. stock getting walloped after missing earnings estimates. high-end jeweler also cutting its outlook. tiffany not alone.
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latest sales numbers show other retailers are struggling as well. courtney reagan on the retail beat in chicago. courtney? >> reporter: that's right, tyler. we're here on the magnificent mile in chicago in front of tiffany. as we look at these same-store sales for november, that earlying up of black friday was no match for super storm sandy really hurting retailers much more than what was expected in the aftermath we know many of them had to close up their stores and then later clean up. wait for the power to return and that hit them much harder than expected. november same-store sales increase of 1.6% comes at about half of wall street had expected. macy's one of the hardest hit by the storm with comp sales down 0.7%. ceo terry lundegren says thanksgiving weekend did see record volume and macy's remains on track to deliver "very strong sales" in the fourth quarter.
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target posting weaki inin ininw sales. they're hopeful for the holidays. limited reports comps up 5% still beating expectations. the specialty retailer says one to two percent percentage points were lost due to the storm. all of gap's grandz outperformed last year's november numbers. cyber monday will be counted in december so we'll have to see if that helps a little bit but now this just makes december more important than ever before. santa really better bulk up. there is some concern that retailers may overpromote and that could hurt margins because of what just happened. in the month of november. >> courtney, thank you very much. staying with the consumer theme now, daily deal website living social is cutting 400 jobs. that's about 10% of its workforce. it comes as groupon's board of directors gathers today to discuss, among other things, the future of its ceo. julia boorstin is taking a
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closer look at the future of the struggling daily deal businesses. >> reporter: well, sue, growth in the daily deals businesses has come to a screeching halt and the companies are trying to adapt to a whole new world. living social blaming its 400 layoffs on the fact that it grew its employee base by more than two times -- sorry, more than ten times in less than two years, saying it is freeing up its resources for critical investments and marketing, mobile and other areas. this after amazon blamed its investment in living social for a loss of $169 million in the third quarter. groupon's board will debate what direction to take the company when it meets today with andrew mason saying with the stock down 80% since the ipo, he'd be surprised if the board is not considering replacing him. he's slur to defend hure to def leadership in the face of the company's accounting issues, european struggles. today groupon announced it is
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major league baseball's daily deal site as groupon looks to sell more exclusive experiences and rely less on lower margin commodity style deals. groupon and the board's two most powerful members are not commenting on these reports that mason may be heading for the door. as long as they back mason, he's going to stay. >> julia, thank you. those hard times for the daily deal websites, groupon and living social that we just talked about, are you a fan? let us know. go to and vote. results later on "power lunch." also a little later we'll talk about a new player in the retail space. deals and loyalty spaces a well. it is called belly. its founder and ceo joins us along with venture capitalist jeff jordan, still ahead on "power lunch." belly, sounds right up my alley. i'm sorry to say.
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the top ten trends of 2013 and stocks that stand to be the big winners. plus, cnbc's rise above road trip continues. next stop, nevada. jane wells looking at how snaene majority leader harry reid's state is handlingle upcoming fiscal cliff. [ male announcer ] this december, remember --
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welcome back to "power lunch." i'm mary thompson with a "market flash." shares of lazy boy, shares off just 12%. the company's earnings missed expectations for last quarter because of higher costs. revenue came in a little bit shy of expectations. nevertheless, the company feels confident enough about its business strategy to reinstate its quarterly dividend. off 11.75%. cnbc traveling to the home states of key congressional leaders involved in the fiscal cliff negotiations today. nevada, senator harry reid's home turf. jane wells is talking to reid's constituents to find out how the fiscal cliff is affecting them. jane. >> reporter: harry reid's state has the highest unemployment rate and the second highest foreclosure rate in the country. and in nevada's second biggest city, one powerful man is concerned the fiscal cliff could bring on an economic reno 911.
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>> do a quick overview here. you're looking at a county the size of the state of plain. >> reporter: lance gillman is straight out of the wild west. he says he's used cash to build the tahoe reknee industrial center, a growing manufacturing and distribution hub. >> it's the largest fee-owned property in the state of nevada. >> reporter: he's been elected county commissioner and he owns a famous brothel. the mustang ranch. you have to be the most diversified businessman in america. wouldn't you say? >> i have a diversified portfolio. >> reporter: gillman is a republican in a state represented by one of america's most powerful democrats, harry reid. >> he's been a friend to the state of nevada. so certainly i supported his campaigns. >> reporter: but he doesn't agree with reid on everything and he's worried about the fiscal cliff in a region recovering more slowly than the rest of the nation. >> to me, our world is tied to confidence. confidence in our leaders, confidence in washington. confidence in taxes.
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trying to figure out what's going to happen with all the health care. and we are absolutely crushed with regulation. this is where the buck stops. all of the rules that are made back there. all the regulations that are made back there. all the financial decisions, they all flow right down here to where you and i are standing. and if companies aren't calling and if they aren't expanding and if we aren't growing, then we're going in the opposite direction. >> reporter: applied analysis predicts the reno region will add 1,900 jobs this year in an area that's lost 35,000 of them. that's assuming the cliff doesn't happen. if it does, tyler, as they say in nevada -- all bets are off. back to you. >> i wonder if he pays health care for his employees at mustang ranch. >> well, i have to tell you, the women there are independent contractors, tyler. they have to provide their own health care, though there is a doctor on site for daily medical checks. more on that at >> somehow i knew you would know the answer to that, jane. by golly! >> i think we should actually send that gentleman to
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washington. he's very common sense, very plain spoken. let him sit down at table. see what he can broker. >> he is a true wild western entrepreneur. >> absolutely. we need that kind of ingenuity, i guess, in washington these days. thanks, jane. what will the hottest tech trends be in 2013? a new widely watched report out today. we have it here first on cnbc. also, a "power lunch" exclusive. jeff jordan the venture capital firm behind facebook, foursquare, instagram, twitter. he's up next with his next big bet. can i help you?
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i heard you guys can ship ground for less than the ups store. that's right. i've learned the only way to get a holiday deal is to camp out. you know we've been open all night. is this a trick to get my spot? [ male announcer ] break from the holiday stress. save on groung at fedex office.
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closing right now. let's check the final trades as they come in. in terms of gold, we saw a little volatility as we did in the equity market just a short while ago. c comex gold is up at $1,726.70. industrial metals which includes the copper and platinum market, copper is up almost 2% on the trading session in terms of a percentage move. but that's off of the best levels of the day.
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palladium is traded at $686.50. up 1.66%. pretty firm day overall for the metals markets. lot of volatility here on the trading floor. bob pisani's here with me. once again -- >> the fiscal cliff circus continues. we're going along, it is nice and quiet day. then of course look at the dow jones industrial average. 1,130 or so. speaker boehner, head of the house, said no substantive progress made in talks with the white house. stocks dropped on those comments. there's that drop in the middle of the day. we came off around noon, that's when the democrats started talking. senator charles schumer of new york, among others, saying he was confident a deal could be made by christmas. stocks rose. you get the idea? stocks up, down, whoever says anything in washington. fact remains this is a pretty good market. 2.5 advancing stocks to deep kleining stocks. that's pretty good. look at advances. when you get a market where health care an materials an financials are all up, although
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fracti fractionally all of them are up, that's a nice advance for markets overall. not so great for retailers. there is serious damage today. kohl's down 10%. you don't see these stocks move 10%. tiffany's missed. that's a big move in tiffany's. a lot of people holding their breath. discounters like ross and tjx, better. >> but still, the retail picture is not looking good. >> the question is whether there will be a lot of discounting going on. inventories are in very good shape. >> the answer to that is probably yes. >> black friday was good, cyber monday was good. second half with a knot badly at all. they just missed badly on the hurricane estimates. even though they brought them down, it was not enough. >> kenny, we're all watching washington and the market will do what it will do depending who's at the microphone. but separate from that, what's important to you in this market? >> i think as we move into the end of the year, certainly that's going to be the focus.
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right? you still have to be concerned on a macro sense of what's going on in europe, what the tone is over there as we move in. the thing about europe, and even here, as we move into the end of the month it will get quiet everywhere because it the the holidays, it is christmas. if we get nothing out of washington in the fiscal cliff, you'll see the market get angry because it wants that clarity. i think you'll see the market back off a little bit. >> the key thing on this fiscal cliff, it is two components. one, it is a time. markets want to see something before the end of the year but it is not just that. it's substantive progress. you can't have a kick the can thing, let's just agree to some vague thing. if they don't see anything substantive, then there will be concerns about cuts, rate cuts in the credit standing of the united states. that's what they're going to be worried about. >> that even goes to obama's terminology yesterday. he talked about presenting a framework by chris mall. framework, all that means is, listen, we've got to plan, we can modify it, tweak it -- the market will not want that.
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>> the market will move very quickly if they perceive it is not substance. remember it's two parts -- soon and substance. >> thank you very much. to the nasdaq right now, bertha coombs is there following the big movers. >> over the last couple of days the nasdaq has managed to move into positive territory for the month of november, back above 3,000. today one of the biggest movers is research in motion getting an upgrade at goldman sachs. one of the firms that sees them perhaps getting some traction with the blackberry 10 rollout in 2013. apple up today as well, up more than 1%. look what's happened this month. nasdaq composite has moved up without the help of apple. apple on track for the third straight monthly loss. what's really made the difference here? games. cisco, some of the big caps like cisco, gilead, qualcomm and amazon, they've accounted for about half of the gains this month. biggest performer in terms of impact is facebook. that's right, folks. facebook this month has
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contributed about one-quarter of the nasdaq's point gain for the month. maybe it is finally found a bottom. back to you guys. >> bertha, thank you. tomorrow president obama visits the hatfield, pennsylvania family of tinker toys, angry birds stuff to discuss middle class tax cuts and the dangers of the fiscal cliff. it is a factory i toured as part of our "how i made my millions" series earlier this year. what is this called? >> just a hopper. >> reporter: intricate creations constructed with a plastic product called k'nex, a build it yourself toy invented by this big kid, joel blickman at the age of 50. >> i really built k'nex for myself. >> reporter: he was so convinced everyone would clamor for the toy, he pitched it to mattel and hasbro. >> what ends up turning out was that none of the toy companies wanted it. >> how do you overcome the
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rejection? >> you get annoyed, which i did. and decide well, we'll do it ourselves. if they're that dumb, what they know can't be that difficult to learn. >> reporter: they developed their own packaging, started marketing it. at first, they shipped it out to a few local shops. >> and they make those toys all in america. p "power lunch" exclusive, the kroe ceo, michael erickson. why do you think the president chose your factory, your company to make his fiscal cliff case? >> tyler, think it is because we are the american story. we're proof that a person with a good idea can convince retailers around the world and kids around the world to play with that idea for the last 20 years we've made over 31 billion parts. made millions of kids happy. i think because of that and because of the fact that we're making it here, the president's been talking about made in the usa since at least the state of the union and as part of his
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advanced manufacturing initiative which we certainly support. for all those reasons and because we believe in the entrepreneurial spirit of america and that we're the most productive and entrepreneurial country on earth. >> now remind me briefly, michael, if you will, the sort of chronology. you were making these toys in china and then chose to bring them back here for manufacturing. why? >> actually did, yes. as many companies did over the last 30 years, shifted things over to china because they thought it was cheaper. but as we looked at ourselves, the depth of the great recession in december of 2008, we said to ourselves we want to make our company stronger, our community stronger, and so let's move the toys back leer. we also believed two give us a speed to market advantage and potentially a marketing advantage as we believe that moms and dads and grandparents who buy our toys would prefer to buy things made here than made overseas. that's proven to be very correct. >> your company, michael, is a large small business. but a small business, nonetheless, by most standards. there's been a tremendous amount
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of talk about how raising tax rates on companies like yours or individuals making more than $250,000 a year would reduce economic growth and would reduce hiring. i'd like you to respond to that and tell me whether you think increasing the marginal tax rates by 3% would change in any way any hiring that you would do. >> well, what i will say is that, like you guys have been talking about all week long, i think we've got to rise above all of the partisan rhetoric we've been talking about. we're talking about fundamental here the fiscal cliff as a math problem. we solve much bigger problems as a nation in the past. we're going to solve this one. i'm 100% confident we'll have a deal by the end of the year and gdp growth will be above 4% next year. so that's where i think we're headed. frankly, i'm not mavging any hiring decisions based on the fiscal cliff. everyone of our employees will have a job on january 1st. if we go over -- but i don't think we're going over. >> how's business and do you think a tax hike on the middle class would affect your
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business? >> a tax hike on the middle class would likely affect every business. toys are obviously a discretionary purchase, though they tend to be recession resistant. still if you take $2,000, $3,000, $4,000 out of a personmakering $50,000 a year, they're going to spend less on discretionary things because the money won't be there. you definitely have a potential demand problem. i think both the president and congress recognize that. as i said i'm highly optimistic that our leaders in washington will resolve this by the end of the year. >> michael, have a good day tomorrow. >> thank you. mary thompson with a "market flash." >> taking a look at shares of monsanto, up 1.6% but trading at a multi-year high. it's been on the move upwards in the last couple of sessions, today getting an added boost from comments made by the chief investment officers of berrien securities. that in london saying one way to plate risk of global warming and increased global population is to buy, among other things, agricultural equipment makers and seed makers like monsanto.
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idc just releasing their tech predictions for 2013. find out where companies are deploying that i.t. cap. some categories might surprise you. don't miss the first on cnbc results up next. if congress fails to come to an agreement on the fiscal cliff, the u.s. unemployment rate will top over 9% in 2013. , i put away money. i was 21, so i said, "hmm, i want to retire at 55." and before you know it, i'm 58 years old. time went by very fast. it goes by too, too fast. ♪ but i would do it again in a heartbeat. [ laughs ] ♪ ♪ you can stay in and share something...
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deals a good value. 37% said i'm pretty old school. give me a paper coupon. that sound like me. idc just out with is closely watched information technology trends for 2013. it is a world where companies will deploy $2 trillion on i.t. projects. microsoft and oracle and hp will probably fight for their lives and a new crop of vendors like amazon, believe it or not, will come on faster than a lamborghini. first on cnbc, idc chief analyst, frank jens. nice to have you back. those are pretty startling numbers. most of this i.t. money is being deployed to what's called the third platform. tell us what that is. >> yes. the third platform is really about a collection of emerging technologies that aren't so emerging anymore. they're really becoming a core part. talking about mobile technologies. talking about cloud. talking about social networking technologies. we're talking about big data,
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analytics technologies. those four. >> you think that will drive 90% of the growth in i.t. >> oh, absolutely. actually, by just next year, they're driving almost 80%. so if we look at 2013 to 2020, that's going to pick up and it will be 90% or more of all of the new growth. >> companies that right now are lagging behind, one of the statistics that i read in my notes here that you think that companies that are not putting 80% or more of their competitive energy into this third platform may become obsolete. >> oh, yeah, there's no question. because if you think about what's happening and the cloud is probably a good example. amazon is coming in right now with amazon web services and they are going in to the markets of companies like hp and ibm and microsoft, sap oracle, 60% to 80% margins and they are coming in with a 20% margin saying we're going to come in and use
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cloud technology, bring prices down for customers, reach much larger volumes and really almost break the business model of these traditional players. >> who are the cutting edge companies? you mentioned oracle certainly but who are some of the cutting edge companies that you see out there right now who really have a leg up in expenditures on a high-percentage basis to the third platform? >> well, there's no question. i talked about ibm and hp and those guys as if they're just the old school. these companies are also watching major efforts to be third platform leaders. so certainly you have to include them. microsoft is investing an enormous amount to build their cloud. anyone who turns on a television knows they're spending a fortune on launching the surface. raising their chances of success in mobile tablets and mobile platforms. in the nontraditional i.t. place i'd say google obviously is becoming a threat in that market. facebook, you just mentioned.
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facebook is coming in as well. believe it or not, enterprises are going to be using facebook and other social networks as part of their enterprise security foundation which you would have never thought would happen. >> no, you wouldn't, but it will be fascinating to see how it all unfolds. frank, thanks. joining us again, jeff kilburg of killer capital management. jeff says m arm arm&a activity jumping off that point. >> oracle came in to the space and really validated the space. larry ellison's $37 billion he rakes in every year, he's only making $1 billion on the cloud space. we focus on cisco. they quietly made three acquisitions and made one today. we'll see a lot of upside movement in who's going to get targeted akamai.
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they help the folks bring the internet faster -- >> traffic. they're a traffic company. but one bad deal with really mess up your whole year. just ask hp. >> absolutely. but this space is growing. you'll see oracle lead the way. >> jeff, thank you very much. sue, back down to you. a new player in the retail deals and loyalties space. it is called belly. its founder and ceo joins us along with venture capitalist jeff jordan, partner and aen dreessen horowitz. find out what makes their business different. it is a "power lunch" exclusive around it is coming up next. [ engine revs ] ♪ ♪ [ male announcer ] the mercedes-benz winter event is back, with the perfect vehicle that's just right for you, no matter which list you're on. [ santa ] ho, ho, ho, ho!
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take a look at shares of ebay. they're up almost 2% today. but this is also an eight-year high for the stock. over a ten-year period, that stock is up better than 204%. hopefully it was in your portfolio. one of the most buzzed about start-ups is belly. it is a digital loyalty program that helps businesses reward customers each time they make a purchase. either by mobile app scans or physical punch cards. in a "power lunch" exclusive, joining us today, belly's ceos
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join us. they sunk $10 million into belly earlier this year. gentlemen, welcome. nice to have you here. let me start with you, logan. because we've talked a lot about the lady deal sites in the show today and on cnbc. a number of them are starting to struggle and their stock prices are struggling as well. what makes your company belly different than the traditional sites that we've been talking about today? >> i think the daily deal industry really exploded based on providing discounts and coupons for people to find and discover new places. but with merchants, the sustainability really came into question when merchants know, small businesses know that 80% of their revenue is driven by 20% of their customers. so they started to really look for new solutions to help drive frequency, retention to create better relationships with their customers and ultimately drive
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loyalty. >> give me an example of what a reward would be for a typical customer. >> well, we try and focus on custom unique rewards for individual businesses. so every business that we work with we try and understand their culture, their personality and their business objectives. beyond just getting a free cup of coffee or being able to cut the line, we have great rewards at comic book shops where you can punch the owner in the gut, shave your barber's beard, pie your baker in the face. they're quirky but it is not just quirk for quirk sake. we try and help businesses create relationships with their customers. >> jeff, you put money in to this company and i wonder what made it look different to you, worth your money, and what makes it different from, say, a foursquare, in your book? >> you know, foursquare is for checking in to a business. this really is loyalty. it's a digitization play. belly replaces the old punch cards that you'd go in and get a punch or a stamp. by digitizing that interaction,
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it gives the small business owner incredibly relevant and important information on their customer base. who are their best customers, how frequently can they come in, how can they market differentially to different customers based on their usage pattern. so the power of digitization with an ipad at the cash register and smartphone in the consumer's hand is really compelling for us. >> based on, jeff, what you know of other companies that you've been involved in and we mentioned the start-ups that you were involved in -- what kind of growth prospects do you think a belly has? >> you know, there are millions of small businesses all looking for ways to grow their business and sustain it. belly is a lot of the companies in the bailey deal sites for us are focused on new user acquisition. belly is focused on optimizing your existing user base, making them loyal, increasing their repeat purchases. that's a big market. >> it is a big market. let me turn you to the broader industry as a whole. we've been talking a lot, jeff
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and logan, about groupon and whether or not the ceo at that company, as it starts to have its troubles, should remain ceo of the company. jeff, what do you think? >> i don't have an opinion on that. i'm not on the board of groupon. >> i know. that's why i'm asking you. >> i mean andrew's done a wonderful job building a business. it's just a four-year-old company. it's got over 10,000 employees and a billion dollars in revenue. that's a strong accomplishment. >> logan, let's turn back to your business, if i could. your hopes for growing the business, you have this seed money that you got from jeff and andreesen horowitz. eventually they will want a return on their money. have you thought far enough ahead to see whether or not perhaps you'd like to become a publicly held company or not? >> you know, ript nowi think itl early. belly just been around just shy of 500 days. so far we've started with one location 500 days ago and we're
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in 4,000 merchants now. we're coming up on 5 million visits to those locations. so we're excited about our growth continuing to grow. i think we started to prove our model in the loyalty space and we'll continue to innovate and try and help these businesses that we work with create better relationships with their customers and see what happens. >> what are you hearing from those businesses about the fiscal cliff, if anything at all? are they worried that if indeed we get close to the fiscal cliff or we go over the fiscal cliff that that will affect their businesses? >> well, for us, we primarily focus on working with small, medium size businesses. fiscal cliffs and politics don't come up much in our conversations. we focus on creating customer unique rewards. i think businesses know from a consumer standpoint, it's greater than 90% are disposable income is spent within a couple of miles of your home. focusing on local, helping businesses retain customers an drive frequency in their local markets can really help drive
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through any potential impact of a fiscal cliff. >> jeff, what are you hearing in the valley about the fiscal cliff, how concerned are the other people that you talk to, the inknow vnovators out there, are millionaires, billionaires and many of whom are trying to start new businesses in the valley. >> you know, the perception is more about -- the talk is more about the potential impact on business and allowing -- not taking action to address this issue and letting it expire is bad for business. everyone's business. be it high-tech, low-tech, silicon valley or anywhere else. so we -- the most important thing the valley wants is for our elected leaders to do the right thing and actually deal with the issue. it sounds like they're cautiously making progress. we're very hopeful they do. >> i wish i had a "rise above" button for both of you, but unfortunately, you're on remote. thanks, guys, best of luck to both of you. we're back in a second and
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we'll check the markets for you when we come back. breathe, and how that feels. copd includes chronic bronchitis and emphysema. spiriva helps control my copd symptoms by keeping my airways open for 24 hours. plus, it reduces copd flare-ups. spiriva is the only once-daily inhaled copd maintenance treatment that does both. spiriva handihaler tiotropium bromide inhalation powder does not replace fast-acting inhalers for sudden symptoms. tell your doctor if you have kidney problems, glaucoma, trouble urinating, or an enlarged prostate. these may worsen with spiriva. discuss all medicines you take, even eye drops. stop taking spiriva and seek immediate medical help if your breathing suddenly worsens, your throat or tongue swells, you get hives, vision changes or eye pain, or problems passing urine. other side effects include dry mouth and constipation. nothing can reverse copd. spiriva helps me breathe better. (blowing sound) ask your doctor about spiriva.
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